UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION GLOBAL TELEMEDIA INTERNATIONAL, INC., a Delaware corporation; JONATHON BENTLEY-STEVENS, an individual; REGINA S. PERALTA, an individual, Plaintiffs v. DOE 1 aka BUSTEDAGAIN40; DOE 2 aka ELECTRICK_MAN; DOE 3 aka BDAMAN609; and DOES 4 through 35, inclusive, Defendants. Case No.: SACV 00-1155 DOC (EEx) SPECIAL MOTION TO STRIKE [Cal. Civ. Proc. � 425.16]; SUPPORTING MEMORANDUM OF POINTS AND AUTHORITIES Date: January 22, 2001 Time: 8:30 a.m. Courtroom: 9-D MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION A. Preliminary Statement Global Telemedia International, Inc. (“GTMI”) and GTMI officers Jonathon Bentley-Stevens and Regina S. Peralta (collectively, “Plaintiffs”) have filed a lawsuit for defamation and related torts involving statements made on the Internet. This lawsuit was filed as part of a transparent effort to intimidate and silence individuals who are critical of Plaintiffs’ corporate performance. The Complaint is a textbook example of a SLAPP lawsuit and should be dismissed pursuant to the provisions of California Code of Civil Procedure section 425.16. B. Factual Background GTMI is a publicly traded company that purports to license and sell telecommunications services, including telephone, broadband wireless technology, cable and Internet services, and also to have agriculture, mining, timber export, and furniture manufacturing operations. [FOOTNOTE 1]
As such, a significant number of people have invested their money in GTMI and are justifiably interested in its performance. GTMI’s stock has fluctuated greatly this past year, but has generally followed a downtrend, which is unsurprising given the current market. Gray Decl., 2, Exh. A. GTMI’s president, Plaintiff Stevens, has already been investigated and sued by the Securities Exchange Commission for allegedly committing securities fraud while employed with a company called Global Timber Corp., whose shares the SEC briefly suspended from trading under suspicion of securities fraud in 1996. Gray Decl., 4, Exh. B. Now, Stevens is once again under SEC scrutiny (along with GTMI) for fraudulent stock manipulation, as indicated in a recent letter from the SEC and in GTMI’s own public filings. Gray Decl., 5, Exh. C. The activities of Plaintiffs GTMI and Stevens have also been spotlighted in a series of scathing articles in the Orange County Register, written by investigative journalist Jonathan Lansner. Gray Decl., 6, Exh. D. Defendant Reader is an individual of limited financial resources who tried to improve his economic position by investing in the stock market. Having come across some glowing press releases issued by GMTI, Reader decided on a whim to buy 2,000 shares of GTMI stock, hoping to quickly cash in on this exciting company. See Declaration of Ronald Reader (“Reader Decl.”), 2. Reader’s initial “ELECTRICK_MAN” posts on the Raging Bull GTMI Message Board reflected his excitement and curiosity about GTMI. He posted excerpts from GTMI’s press releases and public filings, links to those and other interesting materials, and questions about the opportunity presented by his GTMI investment. Reader Decl., 4, Exh. 1. However, shortly after his purchase, Reader realized that he needed to learn more about this company that he had invested in. He delved deeper into GTMI’s SEC filings and the GTMI Message Board, and learned some things that caused him concern. Therefore, he sold all of his GTMI shares for a modest profit. [FOOTNOTE 2]
Reader Decl., 5. Reader never took a “short” position in GTMI stock, or otherwise traded in GTMI securities, besides the above transactions. Reader Decl., 6. After selling the stock, Reader continued his research. What he learned caused him to believe that he had narrowly escaped with a profit, having been “suckered” (along with other shareholders) into buying the stock. To Reader, GTMI’s corporate structure and dealings appeared to be little more than a shell game. Reader Decl., 7. Seriously disenchanted, Reader expressed his dismay on the Message Board, posting additional links to, and excerpts from, GTMI’s public statements � as well as various questions that those materials raised in his mind. But even then, he did not post disparaging or untrue statements about GTMI or its management. Reader Decl., 8. He merely wanted people to do their own due diligence and read all of the publicly available facts about GTMI, not just its glowing press releases, so that they might avoid the type of financial loss ($50,000) that he experienced several years ago when he got caught up in the hype of another company that issued fabulous press releases without any follow through. Reader Decl., 8, Exh. 2. Reader’s statements at issue in this case are innocuous concerns about GTMI’ s sub-standard performance. [FOOTNOTE 3]
As alleged, Reader made two essentially identical statements on the Message Board [FOOTNOTE 4]
The thing that concerns me is their PR statements give them the appearence [sic] of being so high tech, so cutting edge but their real life product is so slow or non-existant [sic]. The companies [sic] statements are so forward looking that: �Their real life product roll-out is so slow and several of their products are just plans on the drawing board (do not exist).
Complaint, 16; Exh. 2; see also Reader Decl., 9 and 10, Exh. 3. Plaintiffs have improperly targeted Reader for these statements. In addition to filing this meritless and vindictive lawsuit, Plaintiffs have exposed Defendants to actual danger. Reader Decl., 12-15. Plaintiffs befriended certain Message Board users and encouraged them to post private emails from GTMI on the Message Board, so that Plaintiffs could inappropriately disclose private information about Defendants without appearing directly responsible. Plaintiffs also instructed their public relations contact, Tim Garlin of PrimeVest, to post emails on the Message Board in this fashion. Several of these impromptu “press releases” expressed inflammatory and vindictive comments about the Defendants, and even threatened them with criminal convictions and class action lawsuits. Through these public releases, Plaintiffs demonized Reader (and the other Defendants), characterizing Reader’s statements as destructive behavior equivalent to that of a thief who “stole into your home and took your savings.” Gray Decl., 13, Exh. J. Plaintiffs stirred the ire and venom of the posters on the Message Board, several of whom have displayed � in the language of their posts – an unsteady judgment and almost unnatural preoccupation with the “soap opera” played out on the GTMI Message Board. Plaintiffs ultimately released an email that was posted on the Message Board (as Plaintiffs expected), exposing Reader’s true name and residential address, thereby destroying his personal privacy and exposing his family to the very real threat of physical danger from the other posters. Gray Decl., 13, Exh. J. As explained below, the Complaint is not meritorious because the innocuous statements cited in the Complaint are not actionable. Reader’s statements were not assertions of fact and therefore cannot be defamatory. Even if his comments are considered statements of fact, they are substantially true. In addition, Reader believed his statements to be true, thus he did not act with the requisite actual malice. Reader Decl., 9 and 11. Further, his statements did not cause any damage to Plaintiffs’ reputation. Finally, Plaintiffs’ other causes of action, arising out of protected speech, are analyzed like the defamation claim, and also must fail. II. INTRODUCTION TO THE INTERNET AND RAGING BULL MESSAGE BOARDS An understanding of the Internet and the Raging Bull Message Boards is essential to resolve this Motion. As the United States Supreme Court has noted, the Internet is a democratic institution in the fullest sense of the word. [FOOTNOTE 5]It serves as the modern equivalent of Speakers’ Corner in England’s Hyde Park, where the common man may voice his opinion, however silly, profane, or brilliant it may be, to all who choose to listen. Knowing that people have personal and economic interests in the corporations that shape our world, and in the stocks that will hopefully provide for a secure future, and knowing, too, that people love to share their opinions with anyone who will listen, Raging Bull organized an outlet for the expression of opinions on these topics. This outlet, called the Message Boards, is an electronic bulletin board system where individuals freely discuss major companies by posting comments for others to read and respond to. These forums act as the electronic equivalent of a hallway cork-board by allowing participants to post messages for others, or simply read what has already been posted. The collection of messages posted by participants is archived and is accessible to users, creating a form of prolonged conversation. Raging Bull has built a Message Board for nearly every publicly traded company and anyone may post messages to it. The messages are not regulated or endorsed by Raging Bull or the companies discussed. On the Message Board, real or perceived problems with a company’s stock, products, and management are frequently discussed. The subject companies frequently do not like the opinions expressed on the Message Boards. Unlike the traditional media outlets that are dominated by large corporations, the Internet is beyond the control of corporate spin doctors. [FOOTNOTE 6]Given the increasing consolidation of media companies, the alternative soapbox of the Internet is essential in order to maintain a diverse marketplace of ideas and opinions.[FOOTNOTE 7] The individuals who post on the Message Boards generally do so under a screen name or “handle” — similar to the handles that truck drivers use when communicating via CB radio. These typically colorful nicknames protect the writer’s identity from those who may disagree with him, and encourage the uninhibited exchange of ideas and opinions. Although the Message Boards’ apparent anonymity gives some people cause for concern, this anonymity is fully protected under the First Amendment. [FOOTNOTE 8]The United States Supreme Court has recognized the right to speak anonymously. McIntyre v. Ohio Elections Comm’n, 514 U.S. 334, 115 S. Ct. 1511, 131 L. Ed. 2d 426 (1995); see also, Rancho Publications v. Superior Court, 68 Cal. App. 4th 1538, 1540-41, 81 Cal. Rptr. 2d 274, 275 (1999). In McIntyre, the Supreme Court recited an impressive listing of important anonymous contributors, ranging from Shakespeare to the authors of The Federalist Papers. 514 U.S. at 342-44. After extensive discussion, the Court concluded that anonymity “is not a pernicious, fraudulent practice, but an honorable tradition of advocacy and of dissent. Anonymity is a shield from the tyranny of the majority.” Id. at 357. The right to anonymity on the Internet is given particular deference. See, e.g., ACLU v. Zell Miller, 977 F. Supp. 1228, 1230 (N. Dist. Ga. 1997) (constitutional right to communicate anonymously and pseudonymously on the Internet, and discussion of frequent practice of Internet users to falsely identify themselves); see also, ACLU v. Johnson, 4 F. Supp. 2d 1029, 1033 (Dist. Ct. New Mex. 1998) (upholding right to communicate anonymously over the Internet). Anonymity on the Message Boards is particularly important. As seen from the various messages and responses posted on the GTMI board, the exchange of opinions can get very heated, and they are often peppered with invective and insults. Indeed, pro-GTMI adherents heatedly took Reader to task on the Message Board for his opinions. Reader Decl., 16, Exh. 8. Message Board readers view these exchanges with a grain of salt, realizing that they cannot identify the speakers or evaluate their credibility, and understanding the informal, conversational, and generally subjective nature of the posts. Plaintiffs should not be permitted to transparently employ litigation as a procedural vehicle to silence those who do not agree with GTMI’s public-relations machinations, and to punish those who disagree with GTMI’s opinion of itself. III. SECTION 425.16 MANDATES DISMISSAL OF LAWSUITS DESIGNED TO CHILL FREE SPEECH California law protects against the use of the judiciary to chill the exercise of free speech. Claims that have this intended effect are known as “SLAPP” suits, or Strategic Litigation Against Public Participation. In order to thwart SLAPP suits, the Legislature enacted California Code of Civil Procedure section 425.16. This statute requires that a lawsuit be dismissed if: (1) the suit is based on a defendant’s exercise of his free-speech rights and, (2) the plaintiff cannot establish a probability of success on the merits. Examining Section 425.16, one court noted:
SLAPP suits stifle free speech. They undermine the open expression of ideas, opinions and the disclosure of information. “The marketplace of ideas, not the tort system, is the means by which our society evaluates [and validates] those opinions.” The threat of a SLAPP action brings a disquieting stillness to the sound and fury of legitimate . . . debate.
Beilenson v. Superior Court, 44 Cal. App. 4th 944, 956, 52 Cal. Rptr. 2d 357, 365 (1996). Importantly, in 1997 the Legislature amended Section 425.16 to state that it “shall be construed broadly.” Cal. Civ. Proc. � 425.16(a). Language was also added to underscore that Section 425.16 applies to “. . . any other conduct in furtherance of the exercise of . . . the constitutional right of free speech in connection with a public issue or an issue of public interest.” Cal. Civ. Proc. � 425.16(e)(4); Briggs v. Eden Council For Hope & Opportunity, 19 Cal. 4th 1106, 1119, 81 Cal. Rptr. 2d 471 (1999) (statutory amendment reflects original legislative intent that Section 425.16 be construed broadly). The courts have given special consideration to SLAPP cases and have noted that “the early termination of [such a] lawsuit is highly desirable . . . . Moreover, �we cannot forget that the public has an interest in receiving information on issues of public importance even if the trustworthiness of the information is not absolutely certain.’” Baker v. Los Angeles Herald Examiner, 42 Cal. 3d 254, 269, 228 Cal. Rptr. 206 (1986).[FOOTNOTE 9] That the instant lawsuit was filed solely to punish disliked, but constitutionally protected, speech can hardly be doubted. This is precisely the type of litigation that the drafters of Section 425.16 intended to eliminate from our court system.[FOOTNOTE 10] If this frivolous suit is allowed to proceed, not only will it unnecessarily burden judicial resources, but it will impose an even costlier toll on the preservation of democratic debate. IV. THIS LAWSUIT FALLS UNDER THE SCOPE OF SECTION 425.16 BECAUSE GTMI AND ITS MANAGEMENT ARE PUBLIC FIGURES AND MATTERS OF PUBLIC INTEREST Corporate performance and commercial activities fall into the category of a “matter of public interest.” As such, the public enjoys broad latitude to discuss and present opinions on these topics. In Morningstar, Inc. v. Superior Court, 23 Cal. App. 4th 676, 29 Cal. Rptr. 2d 547 (1994), Pilgrim, Inc., a mutual fund manager and sponsor, sued Morningstar, a financial research company, for defamation because of a published statement that described Pilgrim’s advertisements as misleading. The court held that the allegedly defamatory statement “. . . presents to the public the author’s view on a matter of public concern: the impact on consumers who invest their money in reliance on advertisements such as Pilgrim’s, especially in light of proposed Securities and Exchange Commission regulations concerning mutual fund advertising.” Id. at 695; see also Wilcox v. Superior Court, 27 Cal. App. 4th 809, 822, n.6, 33 Cal. Rptr. 2d 446, 453 (1994) (defamation suit over advocacy of economic boycott by competing court-reporter organization; holding the anti-SLAPP statute applies to “commercial speech”); Church of Scientology v. Wollersheim, 42 Cal. App. 4th 628, 650, 49 Cal. Rptr. 2d 620, 633 (1996) (“. . . matters of public interest include . . . activities that involve private persons and entities, especially when a large, powerful organization may impact the lives of many individuals”). By their very nature, publicly owned companies seek public attention to promote their stock. They voluntarily inject themselves into public discussion. In the seminal case on public figures, Gertz v. Robert Welch, Inc., 418 U.S. 323, 342, 94 S. Ct. 2997, 3008, 41 L. Ed. 2d 789 (1974), the Supreme Court said that “[t]hose who, by reason of the notoriety of their achievements or the vigor and success with which they seek the public’s attention, are properly classed as public figures . . .” GTMI and its officers are indisputably matters of public interest. The very number of news articles concerning the company illustrates this: over 400 such articles in the past decade. Gray Decl., 3. GTMI craves the public light and uses public relations personnel to publicize itself. A significant number of people have invested their money in GTMI and are justifiably interested in its performance. Gray Decl., 2. In fact, under securities laws, GTMI, as a publicly owned company, is required to be run in the interest of its stockholders. The GTMI Message Board on Raging Bull has witnessed over 50,500 postings since 1998. [FOOTNOTE 11]GTMI even has a website to promote its own version of reality.[FOOTNOTE 12] Dismissal is necessary to end the threat to the First Amendment created when voluntary public figures like GTMI, Stevens, and Peralta invite public comment and then try to punish that comment when they do not like what they hear. V. THIS LAWSUIT HAS NO LIKELIHOOD OF SUCCESS ON THE MERITS This lawsuit has no likelihood of success on the merits because (1) Reader’s statements were not assertions of fact and therefore cannot be defamatory; (2) even if the comments are considered statements of fact, they are substantially true; (3) Reader did not act with actual malice; and (4) Reader’s statements did not cause any damage to Plaintiff’s reputation. Moreover, Plaintiffs’ other causes of action, arising out of protected speech, are analyzed like defamation and also fail. A. Reader’s Statements Were Not Assertions Of Fact And Therefore Cannot Be Defamatory Statements of opinion cannot give rise to a valid claim of defamation. Baker v. Los Angeles Herald Examiner, 42 Cal. 3d at 260-261. “However pernicious an opinion may seem, we depend for its correction not on the conscience of judges and juries but on the competition of other ideas.” Gertz v. Welch, 418 U.S. at 339-340. The distinction between a statement of fact and a non-actionable opinion is made by the court, and is based upon the totality of the circumstances. Baker v. Los Angeles Herald Examiner, 42 Cal. 3d at 260-261; see also Rudnick v. McMillan, 25 Cal. App. 4th 1183, 1191, 31 Cal. Rptr. 2d 193, 197 (1994). The context in which the statement was made and the facts surrounding its publication must be considered including (1) the statement’s nature and full content, and (2) the audience’s knowledge and understanding. Id. Moreover, the court must place itself in the position of the hearer or reader to determine the sense or meaning of the statement according to its natural and popular construction. Id. As to the first component (the statement’s nature and content) – if the content is too general, it is considered a non-actionable statement of opinion. In making the distinction between actionable statements of fact and constitutionally protected statements of opinion, the courts have regarded as opinion “any broad, unfocused and wholly subjective comment.” Copp v. Paxton, 45 Cal. App. 4th 829, 837, 52 Cal. Rptr. 2d 831, 838 (1996); see also Melaleuca, Inc. v. Clark, 66 Cal. App. 4th 1344, 1353, 78 Cal. Rptr. 2d 627, 632 (1998) (“The dispositive question for the court is whether a reasonable fact finder could conclude that the published statements imply a provably false factual assertion . . . .”) The courts have recognized that general dialogue about corporate performance, such as here, cannot give rise to an action in defamation. These cases recognize that business commentary and financial analysis are inherently speculative and that criticism of corporate management should not be constrained by defamation claims. For example, in Biospherics v. Forbes, 151 F.3d 180 (4th Cir. 1998), plaintiff was the subject of scorn in Forbes Magazine’s “Streetwalker” column, published beneath the headline “Sweet-Talking Guys.” The column stated that Biospherics’ stock price was based on “[h]ype and hope,” and that “[i]nvestors will sour on Biospherics when they realize that Sugaree [its main product] isn’t up to the company’s claims.” Id. at 182. The court found that this language was not actionable, in part, because “the context and tenor of the article . . . suggests that it reflects the writer’s subjective and speculative supposition.” Id. at 184; see also Morningstar, Inc. v. Superior Court, 23 Cal. App. 4th 676 (1994) (loose and figurative language in a financial article where the reader expects subjective value statements and opinion is not actionable). Likewise, allegedly libelous statements about a publicly traded security (i.e., negative bond ratings) have been held to be non-actionable opinion. Jefferson County Sch. Dist. No. R-1 v. Moody’s Investor’s Services, Inc., 988 F. Supp. 1341 (D. Colo. 1997). As to the second component (the audience’s nature and understanding) � if the statement’s forum is routinely a place for publishing opinions, the courts give this great deference. Allegedly defamatory statements in newspaper columns and radio programs have been held not actionable because they were statements of opinion, expressed through the devices of advocacy, hyperbole, and generality. See, e.g., Baker v. Los Angeles Herald Examiner, 42 Cal. 3d 254 (1986); Rudnick v. McMillan, 25 Cal. App. 4th at 1193 (“[l]etters to the editor are typically laden with literary license for the purpose of expressing one’s opinion”); Hunter v. Hartman, 545 N.W.2d 699, 709 (Minn. Ct. App. 1996); Adams v. Frontier Broadcasting Co., 555 P.2d 556, 566-567 (Wyo. 1976) (“[talk radio programs] are the modern . . . town meeting . . . utilized in a similar way to afford every citizen an opportunity to speak his mind on any given issue . . . . The application of any technique of censorship to such a public forum can only result in the ultimate extinction of that forum”); see also, Gregory v. McDonnell Douglas Corp., 17 Cal. 3d 596, 603, 131 Cal. Rptr. 641 (1976) (“. . . the charges are of the kind typically generated in the `economic give-and-take’ of a spirited labor dispute in which the judgment, loyalties and subjective motives of rivals are reciprocally attacked and defended, frequently with considerable heat”). Courts have further recognized that, in the context of the heated debates that may occur on Internet discussion groups, readers are less likely to view the published statements as assertions of fact. Nicosia v. DeRooy, 72 F. Supp. 2d 1093, 1101 (N.D. Cal. 1999). In the context of spirited critique, “�the audience may anticipate efforts by the parties to persuade others to their position by use of epithets, fiery rhetoric or hyperbole, [and thus] language which generally might be considered as statements of fact may well assume the character of statements of opinion.” Id. One expects to find heated rhetoric and expressions of opinion on Raging Bull’s Message Boards. Internet Message Boards are ephemeral boxing-rings — forums for verbal jousting between opinions. The statements at issue here are just two of the more than 50,500 messages posted on the GTMI Message Board by interested participants who share ideas, respond to each other’s opinions, and engage in animated banter and debate. Viewers approach Message Board posts with a high degree of skepticism and a challenging attitude. Gray Decl., 8, Exh. F. Indeed, even Raging Bull prefaces the Message Boards by urging users to “. . . please approach messages with appropriate skepticism.” Gray Decl., 10, Exh. H. The following examples demonstrate this spirited (and occasionally mindless) debate:
� In GTMI Post No. 49990, user “foolsfool9″ expressed his opinion about the dishonesty of Plaintiff Stevens: “this is the screwing of everybody!!! Jbs know that all he needs to hold is three dollars to hit AMex and now he has stoped most everybody from being able to sell out and break even. most will now need 5.00 or more to break even and all he needs is three. after he hits his three hold on for the shaft thats when everything will go bentley tel!!this is all my opinon but jbs has shown me that he’s only a crook in a suit!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!”
� In GTMI Post No. 50317, user “raginghuff” expressed his opinion about the dishonesty of GTMI’s management: “Obviously, management cannot be trusted. They blatantly lied to their shareholders (No reverse split at these low levels). Fortunately I only have $2850 invested in this piece of #### co which is now worth about $200. One of the reasons I bought into this co earlier this year is because they cancelled a reverse split. I’m going to hold my shares and just chalk this one up to experience. JBS, you should be ashamed of yourself. OUT. Raginghuff p.s. Can you tell that I don’t like to be lied to? Good Luck to all longs (of which I guess I am one).”
� In Post No. 50372, user “cardan” asked other users for information about GTMI’s possible move to the AMEX stock exchange: “so when we get to the amex. will they change tickers again glti to glo??” User “nvshawty” provided this helpful response in Post No. 50384: “CARDAN, YOU ARE A FRIGGIN’ WASTE OF BREATH AND SPACE. DOWN THE IGNORE HOLE FOR YOU.”
� In Post No. 50345, user “akitaman” expressed his opinion about “joemeat,” another user on the board: “joemeat, you are one of the stupidest suckers that ever posted here.” In Post No. 50467, “joemeat” responded in kind: “Akita: That means so much coming from a degenerate who speaks regularly from his lower orifice.”
� Finally, out of nowhere, in Post No. 50414, user “GPMBP” offered an alternative interpretation of Plaintiff Jonathan Bentley-Stevens’ initials: “JBS = JUST BULL SH*&+_-”
Gray Decl., 9, Exh. G. Reader’s posts were not isolated events; they were part of an on-going debate on the Message Board about why GTMI’s stock was not performing well. Indeed, Reader was often lambasted by other posters who ridiculed him for his opinion. For example, when Reader published a link to an SEC news release concerning actions taken against Plaintiff Stevens, Reader received the following blistering responses:
� Post No. 9967: “ELEKKKTRIKKK_MAN I guess that means you’ll be dumping your shares at the market first thing Monday morning and we’ll never have to hear from you again since given your new insights into GTMI you’ll be more than lucky just to get even that. Nahhhh!!!! That would be too easy. Instead you’ll go crawling back to your MM boss with your tail between your legs telling him how you’re getting pounded and laughed at on the Raging Bull GTMI board. And he’ll just square his shoulders and in his usual hard-a*s unappreciative voice yell �That’s what I’m paying you the small bucks for jerk-o*f. Now get back in there before I start beating you with a switch boy!!!’…”
� Post No. 9962: “electrik_jerk: Just give it up, you’re just wasting your time � you can do no damage here. We’ve all done our DD and know we have a winner with GTMI. Good bye, so long, farewell, just leave like you stated you would in your previous post. Otherwise be prepared to be TOSed”;
See Reader Decl., 16, Exh. 8. Regardless of how the audience reacted to Reader’s posts, his general comments about the timing of GTMI’s product roll-out are not actionable.[FOOTNOTE 13] They are not “statements of fact,” because they cannot be proved true or false. Whether a landscape is “pretty” or “ugly,” or whether a product roll-out is “slow,” “practically non-existent,” or just a “plan on a drawing board” — these are all descriptive terms interpreted through each person’s unique world view. This dispute over Reader’s statements can never be definitely resolved, because the adjectives at issue are entirely subjective and generalized. In fact, Reader’s posts are so generalized that it is impossible even to know which product roll-outs he was using as a basis for comparison. In sum, while the slowness of GTMI’s product roll-outs may be debatable, opinions expressed in that debate are not actionable as defamation. The inability of the audience to evaluate posters’ credibility, and the informal, opinionated, and subjective nature of the posts, are hallmarks of that forum, and these conditions color the audience’s interpretation of the messages posted there. A reasonable person visiting the GTMI Message Board might expect to find gossip, rumor, and argument, but not reliable investment data. Moreover, whether GTMI’s product roll-out was “slow” or “practically non-existent” are too generalized and subjective to be likely to be proved or disproved. Thus, Reader’s statements are a matter of non-actionable opinion, not fact. B. Even If The Statements Are Considered Assertions Of Fact, They Are Not Defamatory Because They Are Substantially True Although Reader firmly believes that the statements are not factual assertions, if the Court determines otherwise, Reader can show that the statements are substantially true. Defamation law assesses a statement by its “gist” or “sting” � not by hyper-technical definitions or distinctions. “�It is well settled that a defendant is not required in an action of libel to justify every word of the alleged defamatory matter; it is sufficient if the substance, the gist, the sting of the libelous charge be justified . . . .’” Reader’s Digest Ass’n. v. Superior Court, 37 Cal. 3d 244, 262 n.13, 208 Cal. Rptr. 137 (1984). Reader’s statement in Post 9973 was published on March 25, 2000: “The thing that concerns me is their PR statements give them the appearence [sic] of being so high tech, so cutting edge but their real life product is so slow or non-existant [sic].” Reader’s statement in Post 9985 was published one day later: “Restatement The companies statements are so forward looking that: �Their real life product roll-out is so slow and several of their products are just plans on the drawing board(do not exist).’” These statements were (and still are) substantially true, as shown by even a cursory review of the available GTMI press releases and public filings concerning GTMI products. 1. There Was Good Reason To Distrust Public Statements About GTMI Because Of The Involvement In The Company Of Plaintiff Stevens, Whom The SEC Sued And Is Still Investigating For Securities Fraud Reader had reason to distrust the representations made in GTMI’s public filings and press releases because GTMI’s President, Plaintiff Stevens, was already being sued by the SEC for alleged securities fraud committed at a previous company, Global Timber Corp., and he was being further investigated for similar misconduct at GTMI. In 1998, the SEC sued Stevens for allegedly misrepresenting Global Timber’s financial condition. In 1996, the SEC had briefly suspended trading of Global Timber’s shares for largely the same reason.[FOOTNOTE 14] As Reader quoted in Post 9973, GTMI stated in its own public filing that the “SEC has indicated that it might examine GTMI’s public statements.”[FOOTNOTE 15] GTMI was apparently paraphrasing comments made in an October 18, 1999 letter from the SEC to GTMI, which the SEC later filed as an Exhibit to a motion to compel discovery in the Global Timber case on November 1, 1999.[FOOTNOTE 16] The letter stated, in pertinent part:
In this case [Global Timber Corp.], the Commission requests Mr. Stevens to substantiate certain material representations he has made in numerous Bentley House International Group (formerly Global Telemedia International, Inc.) (“BHIG”) filings with the Commission, press releases and web site. Based on the discovery the Commission has conducted in this Action, it has reason to believe that Mr. Stevens may have made material misrepresentations in these publications and, thus, may once again be violating the federal securities law. Mr. Stevens’ present conduct is directly relevant to establishing a pattern of fraud. Furthermore, if in fact these representations are false, it will demonstrate that Mr. Stevens’ past conduct was flagrant and deliberate, and not merely technical in nature. Finally, there can be no doubt that the fact that Mr. Stevens is currently the controlling person of yet another public company is directly relevant to proving that he has more than an opportunity to violate in the future the federal securities law.
Id. (emphasis in original). Plaintiffs had also been the subject of a series of stinging articles published in the Orange County Register, by investigative reporter Jonathan Lansner.[FOOTNOTE 17] Because of this cloud of doubt hanging over Stevens and GTMI, it was reasonable and truthful for Reader to express the concern felt by him – and by the SEC – that GTMI’s forward-looking statements do not accurately reflect the state of its product roll-outs. 2. Several Notable GTMI Products Had Failed To Roll-Out As Predicted By March 2000, GTMI had established a pattern of issuing press releases announcing exciting research and development efforts and product roll-outs, which then failed to actually occur. GTMI’s public filings also made statements that failed to materialize into reality. GTMI included the boilerplate disclaimer that those statements – carefully phrased in the future, conditional tense – were “forward-looking,” and they certainly were that. Although GTMI’s public statements gave it the appearance of being high tech and cutting edge, many of its products actually rolled out very slowly, if at all, and various acquisitions and R&D projects purportedly on GTMI’s drawing board never materialized into real products. (a)GMTI’s Acquisition Of ITD Fell Through In November 1997, GTMI publicly stated that it had signed an agreement to acquire a telecommunications company called International Teledata Corporation (“ITD”), and that it had secured the marketing rights to a proprietary new satellite transmission protocol. Gray Decl., 14, Exh. K. However, in February 1998, the company explained how ITD’s Chairman, Ranald Stewart had been appointed as GTMI’s Chairman but later resigned because of “certain inconsistencies in representations.” Id. Finally, in April 1998, GTMI announced that it had rescinded the ITD acquisition and cancelled all agreements with ITD. Id. (b)GTMI’s Purchase Of The IEX Da Vinci Product Fell Through In November 1998, GTMI publicly stated that, in July 1996, it had entered into a purchase agreement for a product by a company called IEX, the DaVinci Enhanced Services Platform, but the original purchase agreement had been canceled due to “certain problems.” GTMI later entered into a new expanded Technology Agreement “which includes a ramp-up period.” Gray Decl., 15, Exh. L. But in April 1998, GTMI stated that it had determined that IEX’s products could not meet GTMI’s requirements, and GTMI had terminated its relationship with IEX in January 1998. Id. (c)After Finish Line Was Acquired By GTMI, It Went Bankrupt In April 1998, GTMI publicly stated that, as of November 1996, it had acquired a company called Finish Line Collectibles, Inc., which made a line of Collectible Calling Cards. However, GTMI further explained that, as of July 1997, Finish Line had filed a Chapter 11 bankruptcy petition and discontinued all operations.” Gray Decl., 16, Exh. M. (d)GTMI Bought Log On America But Could Not Make It Profitable In April 1998, GTMI publicly stated that, as of January 1997, it had acquired an Internet service provider (“ISP”) called Log On America, Inc. (“LOA”), but by the fourth quarter of 1997, realized that it could not adequately fund LOA’s operations, and thus had elected to sell it off. Gray Decl., 17, Exh. N. (e)GTMI Could Not Make Its Vision 21 Retail Business Profitable In April 1998, GTMI publicly stated that, because of persistently low revenues from its “Vision 21″ business, which was both a stand-alone business and the primary manner of marketing GTMI’s telecommunications products to the retail marketplace, GTMI had suspended the business in February 1998 and was considering selling it off. Gray Decl., 18, Exh. O. (f)GTMI Never Rolled-Out The UltraPulse Product In May 1998, GTMI publicly stated that it had entered into a Letter of Intent to buy a majority interest in UltraPulse Communications Incorporated (“UCI”), a company that held the exclusive license to develop a wireless communications product based on something called “UltraPulse” technology. The product was not yet developed. Gray Decl., 19, Exh. P. In June 1998, GTMI announced that it was nearing completion of the acquisition agreement. Id. As of August 1998, the agreement still had not been finalized. Id. As of early November 1999, the agreement still had not been finalized, and the technology was undeveloped, and had not even been evaluated yet by GTMI. However, later that month, GTMI stated that it had tested and acquired UltraPulse, and expected to deploy the technology in the first quarter of 2000. In the end, the technology was apparently never developed. Id. (g)GTMI’s Merger With GCN Was Delayed, And Then Scrubbed On May 1, 1998, GTMI publicly stated that, by May 16, 1998, it expected to complete an agreement to acquire a facilities-based carrier and ISP called Global Communications Network (“GCN”), for operational support services. Gray Decl., 20, Exh. Q. On May 20 though, GTMI stated that it expected the merger to be completed by July 15. Id. On June 23 and again on August 20, GTMI announced that it needed more time to complete due diligence on the merger. Id. Finally, on November 19, 1998, GTMI announced that due to continuing technical failures, it had ceased its due diligence investigation. Id. (h)GTMI’s CyberAir Marketing Agreement Was Repeatedly Delayed And Ultimately Led Nowhere In November 1998, GTMI publicly announced that it had agreed to serve as the international marketing arm for CyberAir Communications Inc. (“CyberAir”), that GTMI expected to execute contracts soon for selling blocks of CyberAir traffic in various countries, and that GTMI would begin those sales that same month. Gray Decl., 21, Exh. R. As of May 1999, GTMI still had not begun selling CyberAir traffic, but it announced that it would do so beginning in June 1999. Id. However, it was not until November 1999 that GTMI publicly stated that it expected “. . . to be in a position to utilize the technology of CyberAir by 4th Quarter 1999.” Id. In the end, the CyberAir agreement was shelved and the technology has not been developed. Id. (i)GTMI Did Nothing With The Wireless Technology That It Licensed From Utility Communications, Inc. In April 1999, GTMI publicly announced that it had entered into a license agreement with Utility Communications, Inc. (“UCI”) for its proprietary wireless technology. GTMI stated that “[i]n order to facilitate this technology, it is necessary to deploy a set-top box to compliment the subscriber’s television set. [GTMI] will need to capitalize the completion of the set-top box customization as well as inventory and marketing expenses.” Gray Decl., 22, Exh. S. As of November 1999, however, GTMI stated that it still needed to evaluate the UCI technology and systems. Id. Apparently, the technology never left the “drawing board” stage, because it was not mentioned again in GTMI’s subsequent annual reports or press releases. (j)GTMI Has Never Rolled-Out The Smart-Card Product In January 2000, GTMI announced that, through its BentleyTel.com subsidiary, it was “. . . currently developing [GTMI's] marketing and deployment strategy for a new �International Smart Card.’” Gray Decl., 23, Exh. T. On March 21, 2000, GTMI announced, “We are at the product roll-out stage which will include financial and market planning and basically defining the go-to-market strategies for the international penetration of BentleyTel.com products . . .” Id. Despite these statements, the Smart-Card product still has not been rolled-out. Id. (k)GTMI Has Never Rolled-Out The Message Pilot Product In February 2000, GTMI announced that it had signed a software co-development agreement with Data Exchange Corp. (“DEI”) to develop Message Pilot, a “web-based international message forwarding system” that “. . . will be ready for beta test deployment by April 2000 and commercial distribution by June 2000.” Gray Decl., 24, Exh. U. However, GTMI apparently has never deployed or distributed the Message Pilot product. Id. Because of GTMI’s miserable string of failed business agreements, stagnant R&D projects, and fizzled product roll-outs, it was reasonable and truthful for Reader to express the concern felt by him – and by the SEC – that GTMI’s forward-looking statements do not accurately reflect the state of its product roll-outs, and that GTMI product roll-outs are either slow or non-existent, having never made it off the drawing board. Because Reader’s statements were (and still are) substantially true, they are not actionable as defamation, and this litigation should be dismissed with prejudice. C. Plaintiffs Cannot Establish A Necessary Element Of Their Claims Because Reader Did Not Act With Actual Malice Because Reader’s statements addressed a matter of public concern, Plaintiffs bear the burden of proof as to whether the statements were false. Miller v. Nestande, 192 Cal. App. 3d 191, 198, 237 Cal. Rptr. 359, 362 (1987). Even if false, as public figures, Plaintiffs must demonstrate by clear and convincing evidence that Reader’s statements were made with actual malice, i.e., either actual knowledge of falsity or reckless disregard for truth or falsity. See Gertz v. Robert Welch, Inc., 418 U.S. 323, 349 (1974). If Plaintiffs cannot make such a showing, then Plaintiffs cannot demonstrate a probability of success on the merits, and their claims should be dismissed. See, e.g., Sipple v. Foundation For Nat. Progress, 71 Cal. App. 4th 226, 247-250, 83 Cal. Rptr. 2d 677, 690-693 (1999) (affirming order granting special motion to strike and attorneys’ fees and costs on appeal because, in part, public figure plaintiff failed to show that defendant published allegedly libelous article with actual malice); see also Beilenson v. Superior Court, 44 Cal. App. 4th 944, 950 (1996) (“The clear and convincing standard requires that the evidence be such as to command the unhesitating assent of every reasonable mind . . . . Actual malice cannot be implied and must be proven by direct evidence”). In the instant case, Reader did not post his statements with anything approaching “actual malice.” To the contrary, Reader reasonably believed the statements to be true, as they were based on GTMI’s own public filings and press releases. Reader Decl., 9, 10, and 11. Because Plaintiffs cannot demonstrate that Reader acted with actual malice, and certainly cannot establish such a frame of mind by clear and convincing evidence, Plaintiffs’ case should be dismissed with prejudice. D. Defendant’s Statements Are Not Actionable Because They Caused No Damage to Plaintiffs’ Reputation The transparent nature of this litigation as a SLAPP suit is particularly vivid upon review of the claimed “damage” resulting from Reader’s posts. A SLAPP suit must be dismissed if no damages can be shown. Although presumed damages are sufficient to plead a cause of action for defamation, they are insufficient to withstand a Special Motion to Strike. Averill v. Superior Court, 42 Cal. App. 4th 1170, 1176, 50 Cal. Rptr. 2d 62, 65 (1996). No reasonable person could conclude that Reader’s statements would have a tendency to injure Plaintiffs’ reputation. Plaintiffs Stevens and Peralta are officers of GTMI, a multi-national corporation. The messages in question are ambiguous and are just two of approximately 50,500 messages posted on a Raging Bull Message Board, by an unknown individual, using an obvious pseudonym, to a relatively limited audience, in the midst of a plethora of analyst conference calls, Wall Street powerbrokers, and news reports. The effect of Reader’s statements on Plaintiffs’ business is zero. On the GTMI Message Board, the audience’s inability to identify any speaker detracts from the trustworthiness of the statements found there. As the Supreme Court noted in McIntyre v. Ohio Elections Comm’n:
Don’t underestimate the common man. People are intelligent enough to evaluate the source of an anonymous writing. They can see it is anonymous. They know it is anonymous. They can evaluate its anonymity along with its message, as long as they are permitted, as they must be, to read that message. And then, once they have done so, it is for them to decide what is `responsible,’ what is valuable, and what is truth.
514 U.S. 334, 348 n.11 (1995). Plaintiffs are well aware that Reader’s statements had no possibility of affecting the operation of GTMI’s business. Undoubtedly, if Plaintiffs’ actually believed that Reader’s statements threatened their business, they would have issued a press statement to specifically refute the statements. Indeed, GTMI would have had a duty to refute the information. See, e.g., Rules 4120 and Rule 4310(16), NASD Manual (CCH) (1999) The fact that Plaintiffs took no action, other than to file this suit, shows that they did not reasonably believe Reader’s statements would affect their business, but merely sought retribution for his expression of opinions with which they disagreed. Plaintiffs claim that, as a result of Reader’s posts, prospective customers have been deterred from dealing with GTMI, and that Plaintiffs have been exposed to “hatred, contempt, ridicule and obloquy.” Complaint, 20, 27. This is inherently unbelievable. Surely GTMI’s customers have better sources of information than a couple of Internet posts to a Message Board riddled with spelling and grammatical errors. Moreover, if quotes from GTMI’s own public filings and press releases expose Plaintiffs to hatred, contempt, ridicule and obloquy, then Reader suggests that Plaintiffs have much bigger problems to worry about than a few Internet posts. Plaintiffs also claim, solely on information and belief, that Reader posted his statements to drive down the price of GTMI stock, so that he could buy it cheaply. Not only does this claim lack any basis, it is also incorrect. Reader sold off his GTMI stock almost one week before posting the statements at issue, and never “shorted” the stock. Reader Decl., 5 and 6. It is also pertinent to point out that GTMI certainly has not suffered a stock drop as a result of Reader’s posts. In fact, for three weeks before Reader’s posts in March 2000, GTMI’s stock had already been steadily dropping, and the downtrend has continued almost unabated since then, as it has for other stocks. Gray Decl., 2, Exh. A. Clearly, recovery of damages is not Plaintiffs’ purpose in filing this lawsuit — Plaintiffs seek no remedy for “damages.” They only seek to punish Reader as a scapegoat, to draw attention away from GTMI’s flailing stock price. VI. OTHER CAUSES OF ACTION ARE ANALYZED AS DEFAMATION AND ARE EQUALLY MERITLESS The remaining causes of action included in Plaintiffs’ complaint are equally untenable. They are rooted in the publication of an allegedly libelous statement and, consequently, fall squarely within the rule prohibiting repetitive claims based on defamation. If the defamation claim fails, the related claims in this Complaint must also fail. Section 425.16 applies to any cause of action affecting the exercise of free speech on a matter of public concern, not merely defamation claims. As observed by one court, SLAPP suits sometimes “masquerade as ordinary lawsuits” arising from claims other than defamation. Wilcox v. Superior Court, 27 Cal. App. 4th 809, 816 (1994). The court further noted that “[t]he favored causes of action in SLAPP suits are defamation [and] various business torts such as interference with prospective economic advantage . . .” Id. The pleading requirements and defenses applicable to defamation actions cannot be evaded merely by placing a new label on what is, in essence, a defamation claim. Blatty v. New York Times Co., 42 Cal. 3d 1033, 1044-45, 232 Cal. Rptr. 542 (1986, cert. denied 485 U.S. 934, 99 L. Ed. 2d 268, 108 S. Ct. 1107 (1988). In Blatty, the California Supreme Court dismissed interference with economic advantage claims arising from an allegedly defamatory statement and enunciated the controlling rule:
Not only does logic compel the conclusion that First Amendment limitations are applicable to all claims, of whatever label, whose gravamen is the alleged injurious falsehood of a statement, but so too does a very pragmatic concern. If these limitations applied only to actions denominated “defamation,” they would furnish little if any protection to free speech . . . plaintiffs . . . might simply affix a label other than “defamation” to their injurious-falsehood claims�and thereby avoid the operation of the limitations and frustrate their underlying purpose.
Id. Plaintiffs’ allegations of trade libel and interference with contractual relations and prospective economic advantage are premised entirely upon the allegedly defamatory statements. Because the defamation claim cannot stand, the remaining claims must also be dismissed.[FOOTNOTE 18] VII. ALTERNATIVELY, THE COURT SHOULD ORDER PLAINTIFFS TO PROVIDE A MORE DEFINITE STATEMENT OF THEIR CLAIMS Rule 12(e) of the Federal Rules of Civil Procedure provides that a party can request a more definite statement when a pleading “is so vague and ambiguous that a party cannot reasonably be required to frame a responsive pleading.” Although the Federal Rules of Civil Procedure generally provide for notice pleading pursuant to Fed. R. Civ. P. Rule 8, federal courts have recognized a heightened pleading standard in defamation actions. See 5 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure 1309 (1990). Where a plaintiff “. . . seeks damages or injunctive relief, or both, for conduct which is prima facie protected by the First Amendment, the danger that the mere pendency of the action will chill the exercise of First Amendment rights requires more specific allegations than would otherwise be required.” Franchise Realty Interstate Corp. v. San Francisco Local Joint Executive Bd. of Culinary Workers, 542 F.2d 1076, 1082-83 (9th Cir. 1976), cert. denied 430 U.S. 940, 97 S. Ct. 1571, 51 L. Ed. 2d 787 (1977). “. . . [T]he use of In haec verba pleadings on defamation charges is favored in the federal courts because generally knowledge of the exact language used is necessary to form responsive pleadings.” Asay v. Hallmark Cards, Inc., 594 F.2d 692, 699 (8th Cir. 1979). Indeed, federal courts have dismissed defamation claims pursuant to Fed. R. Civ. P. Rule 12(b) where plaintiffs have not set forth a claim for defamation with sufficient particularity. See, e.g., Carter v. Duke Univ. Medical Ctr., 1995 U.S. Dist. LEXIS 16145, *5 – *6 (M.D.N.C. Oct. 3, 1995) (dismissing defamation claim because complaint failed to set forth time and place of alleged publication, or the “words of libel or slander allegedly made”). Because of apparently mistaken drafting, some portions of the Complaint confusingly claim that Reader defamed Plaintiffs Stevens and Peralta, when Reader did not implicitly or explicitly refer to them. Moreover, in the defamation cause of action, Plaintiffs lump several defendants’ statements together; but it unclear what statement, if any, by Reader is involved – as no such statement is particularly alleged in that claim. Defendants merely allege that Reader and other defendants caused to be published “similar defamatory statements concerning Stevens and Peralta.” Complaint, 25. However, this allegation is so vague as to be unintelligible: Reader’s “similar defamatory statements” are similar to what — similar to other posts by other defendants? Which posts? Similar to previously identified statements by Reader? If Plaintiffs respond to this motion by claiming that Reader’s “similar defamatory statements” are statements by Reader other than the ones specifically alleged in the Complaint, and the Court denies this Motion, then Reader requests that the Court require Plaintiffs to amend the Complaint to precisely allege the complained-of statements. However, notwithstanding the vagueness of the Complaint, the Court can and should grant this Motion because the frivolousness of Plaintiffs’ lawsuit and its harmful impact on free speech are evident from the materials presented in this Motion. VII. Conclusion Plaintiffs’ Complaint is an untenable SLAPP suit that has been filed primarily to chill speech and has no likelihood of success on the merits. The allegedly libelous statements that are at issue simply are not actionable, and the other causes of action are meritless. For all of these reasons, the Court should grant the special motion to strike and dismiss this case with prejudice as to Defendant Ronald Reader. In the alternative, because Plaintiffs’ causes of action are pleaded vaguely, ambiguously, and incongruously, the Court should order Plaintiffs to file a more definite statement of their claims against Reader. Dated: December —–, 2000 MEGAN E. GRAY BRIAN A. ROSS BAKER & HOSTETLER LLP ——————————————– Megan E. Gray Attorneys for Defendant RONALD READER (previously sued as John Doe 2, aka ELECTRICK_MAN)